Edible oil prices: Import duty cut to trim 5-6%

Why edible oil prices are back in focus

Recent inflation data shows refined edible oil inflation has more than doubled over the last four months, while mustard oil inflation has surged sharply. At the same time, retail prices of branded edible oils have been hovering between Rs 110 and Rs 207 per litre across categories and pack sizes. These moves matter because edible oils are a frequent household purchase and a key driver of food inflation.

Government actions and global price moves have also begun to pull in different directions. Some reports point to a fall in domestic retail and wholesale prices over the last few months, while other updates highlight duty changes that can raise landed costs. With the festive season approaching, both consumers and companies are watching how quickly lower global prices and policy tweaks translate into shelf prices.

What has changed in domestic retail prices

Official and industry updates cited a softening trend in domestic prices in August 2022, reversing the earlier pattern of annual increases. In 2020, the increase in edible oil prices was cited in the 7-12% range, and in 2019 in the 3-8% range. But in August 2022, domestic prices were reported to show a declining trend of 2-9%.

In the last two months referenced in the note, all-India average domestic retail prices for select 1-litre packs were cited as moving lower for some key oils. Refined sunflower oil (1 litre pack) was cited at Rs 168 from Rs 187, and refined soyabean oil (1 litre pack) at Rs 150 from Rs 158. RBD palmolein (1 litre pack) was cited at Rs 138 from Rs 121 in the same note.

How much prices fell across oils over five months

A separate update quantified declines over the last five months for both retail and wholesale markets. All-India retail prices of RBD palmolein, refined soyabean oil, refined sunflower oil and mustard oil were said to have decreased by 23%, 12%, 13% and 8% during the last five months. Over the same period, all-India wholesale prices for the same oils were said to have decreased by 25%, 13%, 14% and 9%.

Alongside these declines, the government’s monitoring and regular interactions with the edible oil industry were cited as the mechanism to ensure the benefit of softer international prices is passed on to consumers. The industry also informed that global prices of different edible oils had fallen by USD 400-500 per ton in the last two months, and that this was starting to reflect in retail markets.

Import duty cuts aimed at cooling retail prices

In a move aimed at curbing food inflation, the Indian government slashed import duties on crude edible oils by 10%, with officials indicating it could reduce retail prices by 5-6% in the coming weeks. The reduction covers crude palm oil, crude soybean oil, and crude sunflower oil, with duties lowered from 27.5% to 17.5%.

Officials from the Solvent Extractors’ Association of India (SEA) said the benefit of the duty cut is likely to be visible to end consumers before the upcoming festive season. Trade experts also suggested the change could reduce wholesale market pressure by 3-4%, while the refining sector’s capacity utilisation was projected to increase by 20-25% due to better supply and margins.

Industry commentary: mustard oil and imported oils

Industry executives linked easing prices to both domestic and international factors. Angshu Mallick, managing director of AWL Agri Business (formerly Adani Wilmar), said mustard oil prices have fallen and there has been some correction in prices of imported oils too. He also said edible oil prices had been rising for 6-7 months, pushing up household expenses, and that cooling mustard oil prices were having a downward impact on the broader edible oil complex.

On imports and supply, he cited landed prices of imported soyabean oil at $1,190 per tonne, sunflower oil at $1,275 per tonne, and crude palm oil at $1,180 per tonne. He also said India imported 16 lakh tonnes of oil in August, adding that the trade had enough oil in hand and therefore prices were unlikely to go up.

Festive season outlook linked to crops and stocks

Sanjeev Asthana, CEO at Ruchi Soya Industries, said that from Diwali, edible oil prices could settle back from current levels, pointing to large stocks in producing countries and the harvest of new domestic crops such as groundnut, cotton and soya bean. He also said that in the next two months a higher crop than the previous year was expected, and that good water reserves would benefit rabi oilseed planting.

Another update cited the rupee strengthening to Rs 74.2 to a dollar and an expected good stock of palm oil, with prices expected to remain steady and move slightly downward in the third quarter.

Geopolitics, ports, and short-term wholesale moves

A separate market update linked recent price easing to the Israel-Iran ceasefire holding up and cargo congestion at Kandla Port improving. Industry executives cited imported palm oil prices falling by $10 per tonne to $1,060 per tonne, soya oil by $10 per tonne to $1,150 per tonne, and sunflower oil by $10 per tonne to $1,200 per tonne over the past three days.

Sandeep Bajoria, CEO of Sunvin Group, said the situation had eased and prices had started falling. Pradeep Chowdhary, Managing Director of Gemini Edibles and Fats, said prices had fallen by ₹3 per kg in the last two days across categories, adding that there was no dearth of edible oil and that for consumers prices may fall by 2-3%.

Inflation context: duty hikes can offset global declines

Not all policy changes point in the same direction. Economists noted that a hike in the basic customs duty on crude soybean, palm and sunflower oil from 0 to 20% effective September 14 was expected to offset gains from international price declines, making the net effect marginal on domestic inflation.

Sri Hari Nayudu, economist at the National Institute of Public Finance and Policy (NIPFP), was quoted saying that if increased import duties offset the gains from international price declines, the net effect would be marginal, and that arrivals of new crops would cushion the impact. Another economist, Bhanumurthy, said there may be a spike in retail prices but not necessarily to the extent of the import duty increase.

What consumers are seeing beyond oils: rice prices ease

Alongside edible oils, rice prices were also reported to have fallen ahead of the festive season. Retail prices of common rice varieties such as miniket, swarna, and sona masoori were cited as dropping, with Gobindobhog falling from Rs 220 to Rs 160 per kg. The combination of easing staples can influence perceived food inflation for households, especially when the festive season increases consumption.

Key numbers at a glance

Market impact: what is moving prices right now

The updates point to three immediate drivers of edible oil pricing in India. First, softer international prices are feeding into lower landed costs, and the industry has cited a USD 400-500 per ton fall across oils over two months. Second, policy actions such as lowering import duties on crude oils can reduce near-term costs and are expected by officials to translate into a 5-6% retail reduction, with a 3-4% easing in wholesale pressure.

Third, supply conditions are improving across multiple channels, including higher imports in August (16 lakh tonnes, as cited), easing port congestion at Kandla, and expectations of new domestic crop arrivals. At the same time, the duty hike effective September 14 (from 0 to 20% basic customs duty on crude oils, as cited by economists) shows how quickly policy can counteract global price declines, limiting the net disinflationary effect.

Conclusion

Edible oil inflation has been elevated, but a mix of declining international prices, policy interventions, and improving supply conditions is now pulling retail and wholesale prices lower in several updates. The latest duty cut on crude edible oils is expected to show up in retail prices in the coming weeks, with officials indicating benefits could be visible before the festive season. Further clarity will come from how quickly retailers pass through lower costs and how upcoming crop arrivals influence domestic supply.